Notes on the Suboptimality Result by J. D. Geanakoplos and H. M. Polemarchakis (1986)

Antonio Jimenez-Martinez

No EC200507, Department of Economics and Finance Working Papers from Universidad de Guanajuato, Department of Economics and Finance

Abstract: J. D. Geanakoplos and H. M. Polemarchakis (1986) prove the generic constrained suboptimality of equilibrium allocations in two period economies with incomplete markets. They perturb asset prices at equilibrium when the degree of market incompleteness equals one. However, since prices are not fundamentals that parameterize the economy, a generic result cannot be obtained in such a way. In these notes we provide complete and detailed version of their proof in which the arguments do not depend on the dimension of the market incompleteness and in which utilities and endowments are perturbed.

Keywords: Incomplete Asset Markets; Constrained Suboptimality; Transversality Theory (search for similar items in EconPapers)
JEL-codes: A23 C60 D52 D60 (search for similar items in EconPapers)
Pages: 19 pages
Date: 2002-07, Revised 2005-12
New Economics Papers: this item is included in nep-fmk
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Published in Estudios Economicos

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Related works:
Journal Article: Notes on the Suboptimality Result of J. D. Geanakoplos and H. M. Polemarchakis (1986) (2007)
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